Americans’ personal savings rate continues to plummet

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Snapshot for August 18, 1999

Americans’ personal savings rate continues to plummet

In September and October 1998, the personal savings rate for Americans (consisting of contributions to individual savings accounts as well as employer and personal contributions to 401K, IRA, and similar pension plans) dipped below zero for the first time since the Great Depression. For the entire year of 1998, personal savings totaled just 0.5% of personal disposable income. The figure shows that last year’s rate is merely the latest step in the decline in a savings rate that averaged 7.6% in the 1960s, 8.2% in the 1970s, 6.7% in the 1980s, and 4.8% in 1990-94, before eventually dropping to 2.2% in 1997.

There is broad disagreement among economists over the causes for this trend and its potential impacts on the economy. But regardless of the causes, the savings decline means that households have increasingly less prepared for dealing with unforeseen events such as the loss of a job, a reduction in work hours, or a rise in interest rates.

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EPI is an independent, nonprofit think tank that researches the impact of economic trends and policies on working people in the United States. EPI’s research helps policymakers, opinion leaders, advocates, journalists, and the public understand the bread-and-butter issues affecting ordinary Americans.